‘Vote of confidence’
Experts: Sale of Venetian, Palazzo and Sands Expo shows investors are bullish on Strip’s recovery
Some experts view the news Wednesday of Las Vegas Sands Corp. selling off its properties on the Strip as a sign that the resort corridor is on its way to shedding coronavirus-related economic doldrums and welcoming millions of tourists annually.
The Sands is leaving the Las Vegas market in a two-part deal, where VICI Properties will buy the property and all assets associated with the Venetian and the interconnected Palazzo, along with the adjoining Sands Expo and Convention Center for $4 billion. Apollo Global Management will acquire the operations of the Venetian for $2.25 billion.
In selling its Las Vegas properties, Sands will shift its attention internationally, where “Asia remains the backbone of this company and our developments in Macao and Singapore are the center of our attention,” Las Vegas Sand Chairman and CEO Robert Goldstein said.
But the Sands pulling stakes from its namesake market shouldn’t be viewed as concerning for Las Vegas’ future.
“A $6 billion investment in a market is a vote of confidence,” said Don Snyder, the former UNLV president and a longtime leader in the Las Vegas banking sector. “Apollo is a smart investor. They understand what they’re buying and that level of investment speaks highly about their good feelings for the Las Vegas marketplace and its potential. I consider this to be good news, but there is always some uncertainty with change.”
Bo Bernhard, executive director of UNLV’S International Gaming Institute, lauded the Sands for how it “reinvented the Strip hotel room and transformed Las Vegas’ convention industry.” While some in the community might view the sale as a sign that Las Vegas’ best days might be behind it, he doesn’t agree with that sentiment.
“I know the tendency in moments like this is to feel a sense of loss,” Bernhard said. “Steve Wynn left. Before that, the Mirage sold to MGM (Resorts International). Kirk Kerkorian left. But the next generation is hungry to make their own mark. I’m very optimistic because I know there is another Sheldon Adelson and a company like Las Vegas Sands waiting
to put their own stamp on Las Vegas.”
The sale comes two months after the death of Adelson, Sands CEO and founder who transformed the landmark Las Vegas casino that was once a hangout of Frank Sinatra’s Rat Pack into a towering Italian-inspired complex that is the Venetian and Palazzo.
Adelson, however, for years had pushed his business interests into Asia, where Sands has made most of its money.
According to filings with the federal Securities and Exchange Commission, only 10% of Sands’ EBITDA — earnings before interest, taxes, depreciation and amortization — from the past five years has come from its U.S. operations.
“This happened so quickly after Adelson’s death, I have to wonder if he was a part of the deal,” said Michael Green, a UNLV professor and Las Vegas historian. “I wonder if this was something that he wanted to do or if he opposed it, so they waited until after his passing. I’d bet on the former.”
A Sands spokesman declined comment about when negotiations for the deal started but pointed to the fact that the company went public with its desire to sell its Strip assets in October.
In its five-page report on the sale, investment research firm the Macquarie Group called the deal “unsurprising given (Sands) focus on growing its brand in Asia.”
The report also said that Macquarie expected Sands to “continue to look to enter the U.S. online sports betting and igaming market, a change in tone and stance it had taken in prior years.”
Adelson had long hesitated to put resources into online and mobile gaming endeavors, preferring instead to be bullish on his patented “integrated resort” concept and the company’s convention space efforts.
VICI, a publicly traded and New York-based real estate investment trust firm, is no stranger to the Strip.
The company, which has established business relationships with Caesars Entertainment and Penn National Gaming, owns nearly 30 gaming properties nationwide, including Caesars Palace and Harrah’s Las Vegas, which it leases back to Caesars.
In 2019, investment firm Blackstone made waves when it purchased the Bellagio from MGM, though it now leases the property back to MGM, which runs it.
The Sands deal, however, is different from other lease-back agreements that have become popular on the Strip in recent years. Sands will instead completely exit all operations of its Las Vegas properties once the deal closes.
Las Vegas, which welcomed more than 42 million visitors in 2019, is still reeling from the effects of the COVID-19 pandemic. Because of widespread fears over travel, particularly air travel, the city attracted only 19 million visitors last year, its lowest total in more than 30 years.
And that was felt by the Sands, which posted a quarterly loss of almost $300 million in January.
Sands officials wouldn’t say whether the pandemic-induced losses factored into the company leaving the Las Vegas market, only stressing the immediate focus is squarely in Asia. And they now have more capital to invest.
Patrick Dumont, the company’s president and chief operating officer, said “our long-held strategy of reinvesting in our Asian operations and returning capital to our shareholders will be enhanced through this transaction.”
Goldstein, who labeled leaving the Strip as “bittersweet,” said he was confident Las Vegas would soon return to a more normal operating environment.
“I know I will be rooting for them,” he said.
When people question Bernhard on the future of Las Vegas and the resort corridor, he points to a LIFE magazine cover from 1955 to ease the fears.
“That LIFE cover story talked about how Las Vegas was overbuilt and overdone. It was the beginning of the end for Las Vegas,” said Bernhard, who is also the UNLV associate vice president for economic development.
The new Circa resort that opened in late 2020 in downtown Las Vegas and the soon-to-open Resorts World on the Strip are examples of a new way to experience Las Vegas, he said.
“Las Vegas will always reinvent and will always be the place people visit. … There’s your evidence,” he said.
Green said it would remain to be seen whether Wednesday’s deal signals any type of transition for the Las Vegas market, though he added he fully expected the city to recover to previous business levels once the COVID19 crisis recedes.
“Between the pandemic and this sale, it’s interesting to consider whether we’re at another turning point,” Green said. “We may be, but it may be that this is just another business proposition.”